Student loans are often a young person's first exposure to the world of credit and debt. Both private and government sponsored student loan programs often provide the only means for students to attend college, thus providing a great public benefit.

Student loans, however, create debt that must be managed and paid back, just like a credit card bill or a car loan. Borrowers default on student loans just as they do on other commercial loans. While lenders make it relatively easy for students to obtain loans to pay for college, it is important for students and their parent to minimize the amount of loans they take out. Because borrowers who do not finish school are more likely to default on student loans than those who do finish school, it is also very important to decide how committed your are to attending and graduating from college.

The good news is that student loan programs are quite borrower friendly. Various loan programs exist, including those where either a parent or the student is the borrower. Others allow the student to be the primary borrower, but require a co- borrower as added assurance that the loan will be paid back. A co-borrower is someone who promises to pay in the event the student defaults on the loan. Many banks and universities offer private loans to pay for education expenses. However, the vast majority of students take out federal student loans, which have very low interest rates and offer other significant advantages. For example, repayment of student loans can be deferred while you are in school, and many lenders offer grace periods ( if you encounter a difficult financial situation during the repayment period), consolidation programs, and graduated payment programs that allow your payments to start out low and increase as your income increases.

You can get more information about student loan programs from any college or university, as well as online from private lenders, loan servicing companies, and the federal government web sites are a good starting place to learn about student loan programs.

More students have credit cards than ever before, companies aggressively market credit cards to college students. Often setting up booths on campuses and offering free gifts for applying. They also mail preapproved application forms and offer discounts on items students are particularly interested in. Some students get credit cards just for free gifts offered. While students may plan to destroy the cards, accumulating multiplying cards and unrealistically high credit limits. Initially attractive interest rates often may last for only a limited time. While having one credit card may be useful, carrying many cards can be an invitation to trouble.

Students can quickly accumulate thousands of dollars in debt by:

Paying on the minimum on each card

Paying off one credit card debt by using another credit card

Failing to exercise restraint

With most college students already taking out loans to finance their education, additional credit card debt can put students in a very deep financial hole.

Failure to make timely payments can also contribute to a negative credit rating, which has the potential to harm you in the future. For example, some employers will not hire job applicants with a bad credit history.